Whether benefit of notification no. 214/86-C.E. admissible if raw material supplier of job worker does not has factory?

PJ/Case law/2013-14/1901

Case:- STEMCORE ALLOYS & ISPAT LTD. VERSUS C.C. & C.EX. (A-III), HYDERABAD-III

Citation:-2013 (295) E.L.T. 588 (Tri.-Bang.)

Brief Facts:-These applications filed by the appellants seek waiver and stay in respect of the respective adjudged dues. On a perusal of the records and hearing both sides, we are of the view that the appeals filed by the applicants also can be finally disposed of at this stage. Accordingly, after dispensing with pre-deposit, we take up the appeals.

The appellant in the first appeal worked as job worker for the appellant in the second appeal during the material period. The former manufactured excisable goods out of the raw materials supplied by the latter and cleared such goods without payment of duty under Notification No. 214/86, dated 25-34986. The job worker's grievance is against demand of duty of Rs. 4,31,392/-, confiscation of goods, imposition of penalty, etc. The other party, raw material supplier, is aggrieved by denial of Cenvat credit, imposition of penalty, etc. In both the cases, the impugned demands have stemmed from a crucial fact found by the adjudicating authority which is to the effect that the raw material supplier did not have a factory.

Aggrieved by the orders of adjudication, both the parties had preferred appeals to the Commissioner (Appeals) and had also filed therein applications for waiver of pre-deposit under Section 35F of the Central Excise Act. The appellate authority directed them to pre-deposit 50% of the respective amounts of duty, which they did not deposit within the prescribed time. In the absence of evidence of pre-deposit, the learned Commissioner (Appeals) dismissed their appeals on the sole ground of non-compliance with Section 35F ibid. The present appeals are directed against the orders of the Appellate Commissioner.

Appellant Contentions:-The appellants submitted that, in the scheme of the above notification, the raw material supplier need not have a factory. The proposition is that the said scheme itself is meant for a person without factory who would like to have excisable goods manufactured through job workers.

In his rejoinder, the learned counsel has referred to a few decisions viz., Amul Industries Pvt. Ltd. v. Commissioner - 2006 (206) E.L.T. 1043 (Fri.-Mum.), S.G. Zaveri Pharmapack v. Commissioner - 2007 (217) E.L.T. 591 (Tri.-Mum.), Bata India Ltd. v. Commissioner - 2006 (199) E.L.T. 847 (Tri.-Bang.), Kay Cee Electricals v. Commissioner - 2005 (182) E.L.T. 136 (Tri.-Del.), etc. It is claimed that, in all the cited cases, the benefit of the above notification was allowed to job workers even in the absence of a factory for raw material supplier.

Respondent Contentions:-The learned Superintendent (AR) submitted that no prima facie case for allowing benefit under Notification no. 214/86-C.E. to job-worker for clearance of goods without payment of duty as under said notification raw material supply mandatorily required to have a factory. He also points out that, in a case of another job worker of the second appellant, this Bench directed pre-deposit of 25% of the amount of duty demanded vide Stay Order No. 800/2012, dated 15-5-2012 in appeal No. E/2497/2011 (M/s. Rayalseema Steel Re-Rolling Mills (13) Ltd. v. CCE, Hyderabad-Ill).

Reasoning of Judgment:-After giving careful consideration to the submissions, we have not found prima facie case for the appellants for the following reasons:

a)    Notification No. 214/86-C.E. on the very face of it requires the raw material supplier to have a factory. In fact, almost all references to raw material supplier in the notification are accompanied by mention of factory.
b)    It is not in dispute that the second appellant (Ravi Organics Ltd.) did not have a factory as defined under Section 2(e) of the Central Excise Act during the material period.
c)    The cited decisions have been perused and it is found that, in any of those cases, there is no categorical view expressed by this Tribunal to the effect that a raw material supplier working under the scheme of the above notification need not have a factory. Therefore the reliance placed by the learned counsel on the cited decisions is misplaced. Before the lower appellate authority, these applicants ought to have made reasonable pre-deposits.

The Cenvat credit denied to the second appellant is to the extent of Rs. 22.6 lakhs. The learned counsel has submitted that, as they had supplied the finished goods to SEZ units during the material period, they claimed refund of the unutilized Cenvat credit to the extent of Rs. 19 lakhs. It is submitted that this refund claim was rejected by the original authority and its decision was upheld by the Commissioner (Appeals) and further that the appeal filed against the Appellate Commissioner's order is pending before this Tribunal. Obviously, in that case, there is no stay application. In the facts and circumstances of this case, we are inclined to proceed on the premise that M/s. Ravi Organics Ltd. are entitled to the above refund. If that be so, in the instant case, they should pre-deposit the differential amount viz. Rs. 3/- lakhs (Rs. 22 lakhs less Rs. 19 lakhs). They shall pre-deposit this amount of Rs. 3,00,000/- (Rupees Three Lakhs Only) with the Commissioner (Appeals) to enable him to dispose of their case on merits.

Insofar as the job worker is concerned, we have the benefit of Stay Order No. 800/2012, dated 15-5-2012 which was passed by this Bench against another similarly situated job worker viz. Rayalseema Steel Re-Rolling Mills (P) Ltd. We had asked them to pre-deposit 25% of the total amount of duty demanded Consistently, we direct the job worker before us (Stemcore Alloys and Ispat Limited) to pre-deposit an amount of Rs. 1,00,000/- (Rupees One Latch Only) with the lower appellate authority to enable it to dispose of their appeals on merits.
Both the appellants shall pre-deposits the respective amounts within six weeks from today and report compliance to the Commissioner (Appeals) forthwith, whereupon the latter shall dispose of the appeals (filed against order-in-original) on merits without insisting on any further pre-deposit and in accordance with law, after giving the parties a reasonable opportunity of being heard.
Both the appeals stand allowed by way of remand.

Decision:-Appeal allowed by way of remand.

Comment:-The essence of this case is that to get the benefit under notification no. 214/86-C.E. one of the pre-condition is that the raw material supplier should have a factory. As the condition of the notification was not fulfilled in the instant case, prima facie the case was found to be against the assessee and pre-deposit was ordered.

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PJ/Case law/2013-14/1901

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